The block share rises after solid earnings. What drove Fintech.
Shares in fintech Block rose in after-hours trading on Thursday after the payments company beat first-quarter revenue expectations, powered by its Cash App mobile payments platform.
Total net income for the first quarter was $4.99 billion, up 26% year over year. Gross profit increased 32% to $1.71 billion, or 27% year over year on a combined company basis.
Block (ticker: SQ) also reported an operating loss of $6 million, adjusted operating income of $51 million and a net loss for the quarter of $17 million, or 40 cents per share.
Analysts surveyed by FactSet expected the company led by co-founder and former Twitter CEO Jack Dorsey to report earnings of 35 cents per share on revenue of $4.6 billion.
Block said mobile payment platform Cash App’s gross profit grew 49% from last year, to $931 million. Point-of-sale system gross profit increased 16% to $770 million year over year.
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The company said Cash App’s monthly card actives increased 34% to 20 million in March, and their average spend also increased.
For full 2023, Block increased its adjusted earnings before interest, taxes, depreciation and amortization to $1.36 billion, up from $1.3 billion previously
The results appear to be pleasing investors in the company – which includes mobile payment platform Cash App, point of sale Square and “buy now, play later” service Afterpay. After closing up 1.9% on Thursday, shares of Block were 2% higher in the after-hours session.
Investors have seen Block’s shares pounded this year after a critical report from a short seller. The stock is down 3.8% in 2023, compared with a gain of 5.8% for
S&P 500
index and a jump of 14% in the technology-heavy index
Nasdaq Composite.
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Much of the decline in Block stock has come since March 23 — before which the stock was up 16% year-to-date — when Hindenburg Research disclosed a short position and published a critical report on the business. A short position is a trade that effectively bets against a stock, and Hindenburg alleged that Block had inflated user values and failed to rein in illegal activity by customers on the Cash App platform.
Block pushed back against the claims, first by saying it would explore legal action against Hindenburg, and then by issuing a detailed rebuttal. In a statement, the company provided verified user figures and reiterated its rigorous approach to risk and compliance.
Investors should not expect the headwinds from Hindenburg’s claims, which divided Wall Street, prompting a series of downgrades from analysts, to let up just yet. While the core metrics from Block’s earnings will be key when the company releases results, expect questions — and potentially new revelations — as analysts are almost certain to benefit from the earnings conference call to grill management.
Block also faces increasing competition from PayPal ( PYPL ) and Apple’s ( AAPL ) Apple Pay program. In addition, Bank of America (BAC), JPMorgan Chase (JPM) and five of the other major banks behind the payment network Zelle plan to launch a digital wallet this year. If the digital wallet is integrated into services already offered to existing bank customers, they can choose to use Zelle’s product over Block or
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PayPal simply by clicking or tapping the option when you buy online.
Write to Jack Denton at [email protected] and Janet H. Cho at [email protected]
